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The National Association of Securities Dealers Automated Quotation (NASDAQ) and the New York Stock Exchange (NYSE) are the two largest stock exchanges in the United States. According to Statista, the New York Stock Exchange lists the shares of 1,980 publicly traded companies headquartered in the US. The Nasdaq lists 2,918, and that’s just domestic stocks. Combined, both exchanges also include more than 1,400 international companies.
The point is that there is a great stock market, which is part of why so many financial advisors advise their clients not to try to pick stocks. Many of these advisers are likely to caution against stock picking because they assume their clients are not going to base their picks on strategically selected watch lists.
However, those who take the time to create and monitor a stock watchlist can increase their chances of picking winners and avoiding losers while taking the guesswork out of stock investing.
What is a stock watchlist?
A stock watchlist is a collection of securities that investors create and monitor to help them make successful investment decisions. They are not necessarily buying the shares on the watch list, although they could, they are simply segregating them from the larger pack to keep an eye on their performance.
A stock checklist can help you narrow down the thousands of stocks that clutter the market to a manageable list of potential investments that meet the criteria of your specific investment strategy. You can also use a stock checklist to monitor the performance of certain stocks you already own in your investment portfolio.
What stocks should I put on my watch list?
Investors build watch lists based on their own investment styles, goals, and game plans.
For example, some people invest only in the so-called Dividend Aristocrats, which is a collection of S&P 500 stocks that have increased their dividends every year for at least 25 years in a row. They are attractive because they are large, well-established, highly stable companies with enormous liquidity and a track record of weathering market downturns and economic turmoil.
There are currently 65 of them.
An Aristocrat investor could create a stock watchlist containing only the 65 Dividend Aristocrats to isolate them from the 4,000+ options available. But 65 is still too broad a group for investors looking for just a few select stocks that match their criteria.
Here are a few examples of how Aristocrat investors could use a watchlist to identify the right one or two from 65 potential picks:
- A value investor might monitor the 65 stocks on the watch list and wait for the price of one to drop, perhaps during a temporary dip following a bad earnings report.
- An income investor might see all 65 aristocrats and pounce on one when their dividend increases.
- A partial stock investor could own parts of the 65 and watch the watch list for when to sell one that cuts their dividend.
That’s just one example of how three different investors interested in the same group of stocks can create three different watch lists based on three different strategies.
What does it mean when a stock is on the watch list?
When a stock is listed on an investor’s watch list, it means the investor has decided that the stock is worth watching because it looks like one that might fit their plan. Investors put stocks off their lists because they believe they have the potential to become worthwhile investments if they react to a catalyst.
The following is a look at what some of those catalysts are and what some of those reactions might be on different watch lists.
How can I create a stock watch list?
When you’re deciding how you’ll create your stock market watch list, you’ll want to strike a balance between too many and too few. If your watchlist contains too many actions, your list will be too large and cluttered to be effective. If there are too few, it will exclude stocks that might match its criteria.
Your criteria may include:
- Stocks with the highest percentage change the previous day, the previous five days, or the previous month.
- Stocks with the most dramatic changes in trading volume.
- Red flags like stocks experiencing accelerating average daily volume without much price change.
- Trend patterns as common breakout and breakout indicators.
- Bullish indicators like hammer candles or transition indicators like doji candles.
- Stocks that have upcoming earnings calls or quarterly reports.
- Stocks exhibiting continued upward momentum or, for short sellers, downward momentum.
- Changes in analyst ratings.
How do I get a watchlist?
If you already have an investment account, your brokerage probably has its own native tools that allow you to create watchlists right on the platform itself. This is a convenient way to get started because if you decide to make a move based on the behavior of a stock you’re seeing, you can do it quickly without having to move between apps.
In the end, though, the best watchlist is the one with the tools, features, look, and feel that suit your needs, preferences, and strategy.
There are many platforms that allow you to create watchlists for free, such as Google Finance and MarketWatch Watchlist. Free platforms often offer stripped-down versions with simple features like price change trackers.
Other more sophisticated platforms offer tiered plans that give you higher level features with each new pricing package. For example, StockRover offers free, essential, premium, and premium plus plans. The most expensive option is for serious traders. It offers over 650 metrics, over 10 years of historical data, and advanced features like ranked ranking and valuation charts.
Other stock watchlist platforms include:
- Delta Investment Tracker
- Intuit Mint Investment Tracker
- FinViz Stock Filter
- Personal Equity Portfolio Analyzer
- EquityStat
- Yahoo Finance Portfolio Tracker
Don’t be afraid to build more than one
While you shouldn’t clutter a watchlist with too many actions, you can spread out many actions grouped into several different watchlists; most platforms allow you to create more than one.
For example, some investors may use different watchlists to monitor stocks that interest them in different sectors, such as energy, manufacturing, and technology. Others may use multiple lists to monitor stocks with different market caps, perhaps one for small-cap stocks, one for mid-cap stocks, and one for large-cap stocks. For another investor, one watch list might be for domestic stocks and another for international stocks, or one for their short-sale prospects and another for stocks they plan to buy and hold.
final shot
A stock watch list isn’t a magic bullet that makes investing easy, but it can help investors of all experience and skill levels narrow down thousands of available investments to a few that stand out from the crowd. No matter how sophisticated the platform or app you use, action watchlists only work if you communicate with them regularly, monitor their status, and know which changes you will and won’t take action on.
If you’re new to the game, start with the native watchlist tools your brokerage offers, then learn as much as you can about other charts, graphs, metrics, and analytical tools that might be worth paying for as you go.
If you’ve outgrown your current watchlist and are ready to pay for a more premium product, start with one that offers a free trial.
Information is accurate as of August 26, 2022.
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